Booz & Company Global Innovation 1000: Methodology
As has been the case in the past six editions of the Global Innovation 1000, this year Booz & Company identified the 1,000 public companies around the world that spent the most on research and development in 2010. To be included, a company’s data on its R&D spending had to be public; all data is based on the most recent fiscal year, as of June 30, 2011. Subsidiaries that were more than 50 percent owned by a single corporate parent were excluded if their financial results were included in the parent company’s reporting.
For each of the top 1,000 companies, we obtained the key financial metrics for 2001 through 2010, including sales, gross profit, operating profit, net profit, historical R&D expenditures, and market capitalization. All sales in foreign currencies and R&D expenditure figures prior to 2010 were translated into U.S. dollars according to the average exchange rate in 2010. In addition, figures for total shareholder return were gathered and adjusted to reflect each company’s total shareholder return in its local market. All companies were coded into one of nine industry sectors (or “other”) according to Bloomberg’s industry designations, and into one of five regional designations, as determined by their reported headquarters locations.
To enable meaningful comparisons within industries, we indexed the R&D spending levels and financial performance metrics of each company against the median values in its industry. Global expenditures on research and development were estimated using data from the World Bank, the Organisation for Economic Co-operation and Development, the International Monetary Fund, and government research reports.
To understand how innovation strategy, culture, and organization affect performance, we conducted a Web-based survey of nearly 600 senior managers and R&D professionals from more than 400 companies around the globe. The companies participating represented more than US$182 billion in R&D spending, or one-third of the Global Innovation 1000’s total R&D spending for 2010, all nine of the industry sectors, and all five geographic regions.
Each company was classified into one of our three innovation strategy models — Need Seeker, Market Reader, or Technology Driver — based on survey respondents’ answers to four profiling questions. We then asked respondents to rank their company’s most important innovation goals, cultural attributes, and organizational factors, as well as their perception of their company’s performance on each. We analyzed their responses using a variety of statistical methods that allowed us to distinguish the cultural and organizational attributes most prevalent among companies, depending on which of the three innovation strategy models they followed. Company names and responses were kept confidential (unless permission to use them was explicitly granted), but respondents were asked to identify themselves to allow the association of survey answers with financial metrics. We then conducted interviews with a subset of respondents, in order to gain a deeper understanding of the links among strategy, culture, and organization.
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- Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J., and is the global leader of the firm’s innovation practice and its engineered products and services business. He works with high-tech and industrial clients on corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
- John Loehr is a Booz & Company partner based in the firm’s Chicago office. He specializes in helping automotive, industrial, and aerospace companies reach a position of product and market leadership through a combination of product strategy and functional restructuring.
- Richard Holman is a principal with Booz & Company based in Florham Park, N.J. He is a leader of the firm’s innovation practice, specializing in fields with highly engineered products, such as aerospace, industrial, and high tech.
- Also contributing to this article were s+b contributing editor Edward H. Baker and Booz & Company senior associate Marc Johnson.